Hedge Fund Greenlight Capital just released its fourth quarter shareholder letter. The fund is run by renowned hedge fund manager David Einhorn. The fund disclosed new positions in BP and Sprint Nextel, with Ensco, Pfizer and Vodafone as the largest holdings.
Due to its defensive position, Greenlight Capital LP slightly outperformed the market with a much smaller volatility. “Since inception in May 1996, Greenlight Capital,L.P. has returned 1,635% cumulatively or 21.5% annualized, both net of fees and expenses.”
At quarter end, the largest disclosed long positions in the Partnerships were Arkema, Ensco, gold, Pfizer, and Vodafone Group. The Partnerships had an average exposure to equities and fixed income (excluding credit derivatives, gold and foreign currencies) of 101% long and 75% short.
These are the discussions of Greenlight Capital’s top holdings:
Arkema is traded in pink sheet with the symbol ARKAY (ADR), ARKAF, and traded in France with the symbol of AKE.
David Einhorn wrote: “AKE shares rose from €37.53 to €53.87 in the fourth quarter. The company benefitted from sharply rising chemical prices (thanks Mr. Bernanke) and solid execution including the integration of its 2009 acquisition of the United States acrylics business from Dow Chemical and the announcement of a new acquisition of the resin unit from Total, its former parent. Consensus earnings estimates for 2011 have risen from €4.00 to €5.50 per share since the end of September. In 2009, consensus estimates for 2011 were as low as €1.80 and the stock price bottomed at €9.71. It has been much more fun holding AKE through the recovery than it was through the sell-off.”
Ensco (ESV, Financial)
David Einhorn wrote about ESV in his July 16, 2010 letter to shareholders:
Ensco plc (ESV) is an offshore contract oil drilling company operating a large fleet of shallow-water jack-up rigs and a small but new fleet of deep water rigs. The Deepwater Horizon oil spill and resulting 6-month drilling moratorium in the Gulf of Mexico caused significant share price declines throughout the sector. ESV was not involved in the horrible accident, which should not materially impact the company’s long-term potential. ESV has approximately $7 per share in net cash and a tangible book value of $37.50 per share. The shallow water drilling business, which is unaffected by the drilling moratorium, generates $4.00 per share in unlevered mid-cycle earnings and $8.00 per share in peak earnings.
At the Partnerships’ average cost of $39.41 per share, we appear to be getting the shallow water fleet at a low value and the deepwater fleet (in which ESV has thus far invested over $15 per share to build and should add $2.00 and $4.00 to mid-cycle and peak EPS respectively) for free. ESV shares ended the quarter at $39.28 each
He wrote again in this letter:
“In the fourth quarter ESV shares advanced from $44.73 to $53.38 as higher oil prices (thanks again Mr. Bernanke) and increased drilling budgets in the oil and gas industry led to expectations that rig rates and utilization would increase in 2011.”
ESV is also in the portfolios of these hedge funds: Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC, Louis Moore Bacon of Moore Capital Management, LP and George Soros of Soros Fund Management LLC.
Pfizer Inc (PFE, Financial)
David Einhorn did not comment his position in Pfizer. In a interview with Consuelo Mack, he discussed his position in Pfizer. He says that every one knows the issues with Pfizer’s biggest drug Lipitor. He feels that after this expiration of the patent the company will still see a lot of earnings.
David Einhorn has continuously added to his positions in PFE. He started the position in Q1 of 2009 with 5.9 million shares. As of Sept 30, 2010, he owns more than 23 million shares. His is sitting on a small profit with Pfizer. This is his holding history:
BP plc (BP, Financial)
David Einhorn wrote: “During the quarter we established a new position in BP plc (BP), one of the world's largest integrated energy companies, at an average price of $41.18 per share. The Deepwater Horizon oil spill in April 2010 caused a significant decline in BP's share price. BP has reserved nearly $40 billion pre-tax to account for costs related to this accident and has thus far sold $22 billion of non-core assets (with a stated target of up to $30 billion in divestitures), leaving the balance sheet in excellent shape. Pro forma for these asset sales and after taking into account our estimate of BP's eventual oil spill related expenses, we expect BP will still be able to earn nearly $20 billion per year from continuing operations. At less than 7x pro forma earnings, we purchased BP at a 25% discount to its peers. The company is well positioned to reinstate a dividend in early 2011 and generate higher production growth with its high-grade asset base. BP shares ended the year at $44.17 per share.”
Sprint Nextel Corporation (S, Financial)
David Einhorn wrote: “We also established a new position in Sprint Nextel Corporation (S), a wireless communications provider, at an average price of $4.46 per share. Sprint's disastrous Nextel acquisition in 2005 put the company on a painful downward spiral. We think S is now showing the early signs of a promising turnaround. Dan Hesse joined S in 2005 and became CEO in 2007. He has focused on customer service and improving the handset lineup, which have both improved considerably. This has driven subscriber additions and reduced customer churn. We believe S has a significant margin expansion opportunity as it consolidates two networks. Lastly, we think S' uniquely large spectrum position through its direct holdings and via its interest in Clearwire is a valuable competitive advantage in an industry where spectrum is becoming a scarce resource. We value S at a discounted cash flow value of over $10 per share if management delivers on its targeted savings from network modernization. S shares ended the year at $4.23 per share.”
Due to its defensive position, Greenlight Capital LP slightly outperformed the market with a much smaller volatility. “Since inception in May 1996, Greenlight Capital,L.P. has returned 1,635% cumulatively or 21.5% annualized, both net of fees and expenses.”
At quarter end, the largest disclosed long positions in the Partnerships were Arkema, Ensco, gold, Pfizer, and Vodafone Group. The Partnerships had an average exposure to equities and fixed income (excluding credit derivatives, gold and foreign currencies) of 101% long and 75% short.
These are the discussions of Greenlight Capital’s top holdings:
Arkema
According to Google Finance “Arkema SA is a France-based company that specializes in the manufacture and marketing of chemical products. The Company operates through its three business segments: Vinyl Products, Industrial Chemicals and Performance Products.”Arkema is traded in pink sheet with the symbol ARKAY (ADR), ARKAF, and traded in France with the symbol of AKE.
David Einhorn wrote: “AKE shares rose from €37.53 to €53.87 in the fourth quarter. The company benefitted from sharply rising chemical prices (thanks Mr. Bernanke) and solid execution including the integration of its 2009 acquisition of the United States acrylics business from Dow Chemical and the announcement of a new acquisition of the resin unit from Total, its former parent. Consensus earnings estimates for 2011 have risen from €4.00 to €5.50 per share since the end of September. In 2009, consensus estimates for 2011 were as low as €1.80 and the stock price bottomed at €9.71. It has been much more fun holding AKE through the recovery than it was through the sell-off.”
Ensco (ESV, Financial)
David Einhorn wrote about ESV in his July 16, 2010 letter to shareholders:
Ensco plc (ESV) is an offshore contract oil drilling company operating a large fleet of shallow-water jack-up rigs and a small but new fleet of deep water rigs. The Deepwater Horizon oil spill and resulting 6-month drilling moratorium in the Gulf of Mexico caused significant share price declines throughout the sector. ESV was not involved in the horrible accident, which should not materially impact the company’s long-term potential. ESV has approximately $7 per share in net cash and a tangible book value of $37.50 per share. The shallow water drilling business, which is unaffected by the drilling moratorium, generates $4.00 per share in unlevered mid-cycle earnings and $8.00 per share in peak earnings.
At the Partnerships’ average cost of $39.41 per share, we appear to be getting the shallow water fleet at a low value and the deepwater fleet (in which ESV has thus far invested over $15 per share to build and should add $2.00 and $4.00 to mid-cycle and peak EPS respectively) for free. ESV shares ended the quarter at $39.28 each
He wrote again in this letter:
“In the fourth quarter ESV shares advanced from $44.73 to $53.38 as higher oil prices (thanks again Mr. Bernanke) and increased drilling budgets in the oil and gas industry led to expectations that rig rates and utilization would increase in 2011.”
ESV is also in the portfolios of these hedge funds: Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC, Louis Moore Bacon of Moore Capital Management, LP and George Soros of Soros Fund Management LLC.
Pfizer Inc (PFE, Financial)
David Einhorn did not comment his position in Pfizer. In a interview with Consuelo Mack, he discussed his position in Pfizer. He says that every one knows the issues with Pfizer’s biggest drug Lipitor. He feels that after this expiration of the patent the company will still see a lot of earnings.
David Einhorn has continuously added to his positions in PFE. He started the position in Q1 of 2009 with 5.9 million shares. As of Sept 30, 2010, he owns more than 23 million shares. His is sitting on a small profit with Pfizer. This is his holding history:
BP plc (BP, Financial)
David Einhorn wrote: “During the quarter we established a new position in BP plc (BP), one of the world's largest integrated energy companies, at an average price of $41.18 per share. The Deepwater Horizon oil spill in April 2010 caused a significant decline in BP's share price. BP has reserved nearly $40 billion pre-tax to account for costs related to this accident and has thus far sold $22 billion of non-core assets (with a stated target of up to $30 billion in divestitures), leaving the balance sheet in excellent shape. Pro forma for these asset sales and after taking into account our estimate of BP's eventual oil spill related expenses, we expect BP will still be able to earn nearly $20 billion per year from continuing operations. At less than 7x pro forma earnings, we purchased BP at a 25% discount to its peers. The company is well positioned to reinstate a dividend in early 2011 and generate higher production growth with its high-grade asset base. BP shares ended the year at $44.17 per share.”
Sprint Nextel Corporation (S, Financial)
David Einhorn wrote: “We also established a new position in Sprint Nextel Corporation (S), a wireless communications provider, at an average price of $4.46 per share. Sprint's disastrous Nextel acquisition in 2005 put the company on a painful downward spiral. We think S is now showing the early signs of a promising turnaround. Dan Hesse joined S in 2005 and became CEO in 2007. He has focused on customer service and improving the handset lineup, which have both improved considerably. This has driven subscriber additions and reduced customer churn. We believe S has a significant margin expansion opportunity as it consolidates two networks. Lastly, we think S' uniquely large spectrum position through its direct holdings and via its interest in Clearwire is a valuable competitive advantage in an industry where spectrum is becoming a scarce resource. We value S at a discounted cash flow value of over $10 per share if management delivers on its targeted savings from network modernization. S shares ended the year at $4.23 per share.”
